[Federal Register Volume 69, Number 236 (Thursday, December 9, 2004)]
[Proposed Rules]
[Pages 71388-71390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27025]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 69, No. 236 / Thursday, December 9, 2004 / 
Proposed Rules  

[[Page 71388]]



FEDERAL ELECTION COMMISSION

11 CFR Part 300

[Notice 2004-17]


Political Party Committees Donating Funds to Certain Tax-Exempt 
Organizations and Political Organizations

AGENCY: Federal Election Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Election Commission requests comments on proposed 
amendments to its rules governing limitations on national, State, 
district, and local political party committees making or directing 
donations to certain tax-exempt organizations and political 
organizations. These proposed rules would conform to the decision of 
the U.S. Supreme Court in McConnell v. FEC, which included a narrowing 
construction of section 101 of the Bipartisan Campaign Reform Act of 
2002. The Commission has not made any final decisions on the issues 
presented in this rulemaking. Further information is provided in the 
SUPPLEMENTARY INFORMATION that follows.

DATES: Comments must be received on or before January 10, 2005. If the 
Commission receives sufficient requests to testify, it may hold a 
hearing on these proposed rules. Commenters wishing to testify at the 
hearing must so indicate in their written or electronic comments.

ADDRESSES: All comments should be addressed to Ms. Mai T. Dinh, 
Assistant General Counsel, and must be submitted in either electronic 
or written form. Commenters are strongly encouraged to submit comments 
electronically to ensure timely receipt and consideration. Electronic 
mail comments should be sent to [email protected], and must 
include the full name, electronic mail address and postal service 
address of the commenter. Electronic mail comments that do not contain 
the full name, electronic mail address and postal service address of 
the commenter will not be considered. If the electronic mail comments 
include an attachment, the attachment must be in the Adobe Acrobat 
(.pdf) or Microsoft Word (.doc) format. Faxed comments should be sent 
to (202) 219-3923, with printed copy follow-up to ensure legibility. 
Written comments and printed copies of faxed comments should be sent to 
the Federal Election Commission, 999 E Street, NW., Washington, DC 
20463. The Commission will post public comments on its Web site. If the 
Commission decides that a hearing is necessary, the hearing will be 
held in its ninth floor meeting room, 999 E Street, NW., Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: Ms. Mai T. Dinh, Assistant General 
Counsel, or Mr. Albert J. Kiss, Attorney, 999 E Street, NW., 
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002, 
Public Law 107-155, 116 Stat. 81 (Mar. 27, 2002) (``BCRA''), contained 
extensive and detailed amendments to the Federal Election Campaign Act 
of 1971 (``FECA'' or ``the Act''), as amended, 2 U.S.C. 431 et seq. The 
Supreme Court upheld most of BCRA in McConnell v. FEC, 540 U.S. 93, 124 
S. Ct. 619 (2003). Under BCRA section 101(a), a national, State, 
district or local political party committee must not solicit any funds 
for, or make or direct donations to, certain tax-exempt organizations. 
2 U.S.C. 441i(d). Section 441i(d)'s restrictions apply to solicitations 
for, and making or directing donations to, two types of tax-exempt 
organizations (``certain tax-exempt organizations''). These consist of 
(1) organizations described in 26 U.S.C. 501(c) that are exempt from 
tax under 26 U.S.C. 501(a) (or that have submitted an application for 
determination of tax exempt status under section 501(a)) and that make 
expenditures or disbursements in connection with an election for 
Federal office (including expenditures or disbursements for Federal 
election activity); and (2) political organizations described in 26 
U.S.C. 527 (other than a political committee, a State, district or 
local committee of a political party, or the authorized campaign 
committee of a candidate for State or local office).
    In 2002, the Commission promulgated rules at 11 CFR 300.11, 300.37, 
300.50, and 300.51 implementing 2 U.S.C. 441i(d). Explanation and 
Justification for Rules on Prohibited and Excessive Contributions: Non-
Federal Funds or Soft Money, 67 FR 49,064, 49,089-49,091, and 49,105-
49,106 (July 29, 2002). Except for the title of each, the final rule at 
11 CFR 300.11 is identical to the final rule at 11 CFR 300.50, and the 
final rule at 11 CFR 300.37 is identical to the final rule at 11 CFR 
300.51. Id. at 49,106.
    Subsequently, the Supreme Court upheld 2 U.S.C. 441i(d)'s 
prohibitions on the solicitation of funds for certain tax-exempt 
organizations. In a separate analysis, however, the Supreme Court 
stated that 2 U.S.C. 441i(d) raises overbreadth concerns ``if read to 
restrict donations from a party's federal account--i.e., funds that 
have already been raised in compliance with FECA's source, amount and 
disclosure limitations.'' McConnell, 124 S. Ct. at 680-681. The Court 
found ``no evidence that Congress was concerned about, much less that 
it intended to prohibit, donations of money already fully regulated by 
FECA * * * [t]hus, political parties remain free to make or direct 
donations of money to any tax-exempt organization that has otherwise 
been raised in compliance with FECA.'' Id. at 681-682. Accordingly, the 
Commission now proposes to modify its regulations at 11 CFR 300.11, 
300.37, 300.50 and 300.51 to provide that the prohibition on political 
party committees \1\ making or directing donations to certain tax-
exempt organizations is limited to donations of non-Federal funds and 
thus would not apply to donations of Federal funds to these 
organizations.
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    \1\ These restrictions also apply to the national congressional 
campaign committees and to ``an entity that is directly or 
indirectly established, financed, maintained, or controlled by any 
such national, State, district, or local committee or its agent, and 
an officer or agent acting on behalf of any such party committee or 
entity * * *'' and references to political party committees in this 
Notice of Proposed Rulemaking also include these entities, agents 
and officers. See 2 U.S.C. 441i(d); 11 CFR 300.11(b), 300.37(b), 
300.50(b), and 300.51(b); see also Advisory Opinion 2004-25 
(concluding that the chairman of a national congressional campaign 
committee, under the facts presented, was acting in his personal 
capacity and not as an officer or agent of a national congressional 
campaign committee when donating his personal funds to organizations 
engaged in voter registration activity).

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[[Page 71389]]

I. Proposed 11 CFR 300.11--Prohibitions on Fundraising For And Donating 
To Certain Tax-Exempt Organizations

    The Commission proposes to revise 11 CFR 300.11 by modifying the 
prohibition in current section 300.11 on national party committees, 
making or directing any donations to certain tax-exempt organizations. 
As modified, section 300.11 would prohibit the making or directing of 
donations of non-Federal funds to these organizations. Section 300.2(k) 
defines ``non-Federal funds'' as funds that are not subject to the 
limitations and prohibitions of the Act. 11 CFR 300.2(k).
    As revised, section 300.11 would be consistent with 2 U.S.C. 
441i(a)(1) and 11 CFR 300.10, under which national party committees may 
not solicit, receive, or direct to another person a contribution, 
donation or transfer of funds or any other thing of value, or spend any 
funds, not subject to the amount limitations, source prohibitions and 
reporting requirements of the Act, because national party committees 
are barred from accepting non-Federal funds.
    Although only national party committees are the subject of the 
prohibitions in section 300.11, current paragraph 300.11(b)(3) 
erroneously expands the scope of these restrictions to include ``an 
agent of a national, State, district, or local party committee of a 
political party'' [emphasis added]. Accordingly, the Commission also 
proposes to make a technical correction to paragraph 300.11(b)(3) which 
would strike the reference to a State, district, or local party 
committee.

II. Proposed 11 CFR 300.37--Prohibitions on Fundraising For And 
Donating To Certain Tax-Exempt Organizations

    The Commission proposes revisions to 11 CFR 300.37, which applies 
to State, district and local party committees, that are similar to the 
proposed revisions to 11 CFR 300.11 discussed above. Under the draft 
amendments, a State, district, or local committee of a political party 
would be prohibited from soliciting any funds for, or making or 
directing any donations of non-Federal funds to, certain tax-exempt 
organizations.
    The Commission invites comment on whether the Supreme Court's 
rationale for limiting section 441i(d)'s prohibition on directing or 
donating non-Federal funds applies to Levin funds. See McConnell, 124 
S. Ct. at 680-682. Levin funds are funds that a State, district or 
local party committee of a political party raises itself pursuant to 
State law, and are limited to $10,000 per calendar year from any person 
other than foreign nationals and those prohibited from making a 
donation under State law. 2 U.S.C. 441i(b)(2)(A)(ii); 11 CFR 300.2(h) 
and (i). A State, district or local committee of a political party may 
spend Levin funds on ``[a]ny use that is lawful under the laws of the 
State in which the committee is organized'' other than two types of 
Federal election activities: (1) Public communications that promote, 
support, attack or oppose a Federal candidate and (2) services provided 
by certain party committee employees. 11 CFR 300.32(b)(2). The donation 
of Levin funds is subject to amount limitations, certain source 
prohibitions, and reporting requirements under the FECA, even though 
these amount limitations, source prohibitions and reporting 
requirements are different than those applicable to Federal funds. See, 
e.g., 11 CFR 300.31(c) and (d) and 300.36(b). Thus, Levin funds may 
fall within the Supreme Court's description of funds ``already fully 
regulated by FECA,'' and ``otherwise * * * raised in compliance with 
FECA'' that are outside the Court's narrow construction of the 
prohibition in 2 U.S.C. 441i(d). However, the Commission has stated 
that Levin funds are a ``new type of non-Federal funds'' and are 
``unlike Federal funds, which are fully subject to the Act's 
requirements, and unlike ordinary non-Federal funds because they are 
subject to certain additional requirements under BCRA.'' Explanation 
and Justification to Final Rules; Prohibited and Excessive 
Contributions: Non-Federal Funds or Soft Money, 67 FR 49,064, 49,065, 
and 49,085 (July 29, 2002). The Commission invites comments on whether 
State, district and local political party committees should be allowed 
to make or direct donations of Levin funds to certain tax-exempt 
organizations to the extent permitted by State law.

III. Proposed 11 CFR 300.50--Prohibited Fundraising by National Party 
Committees

    For the reasons addressed above in the discussion of proposed 
section 300.11, the Commission proposes to revise 11 CFR 300.50 by 
modifying the prohibition in current section 300.50 on national party 
committees making or directing any donations to certain tax-exempt 
organizations. As modified, section 300.50 would prohibit national 
party committees from soliciting any funds for, or making or directing 
donations of non-Federal funds to, certain tax-exempt organizations.
    The Commission also proposes to make a technical correction to 11 
CFR 300.50(b)(3) that is similar to the proposed technical change to 11 
CFR 300.11(b)(3) discussed above.

IV. Proposed 11 CFR 300.51--Prohibited Fundraising by State, District, 
or Local Party Committees

    For the reasons addressed above in the discussion of proposed 
sections 300.11 and 300.37, the Commission proposes to revise 11 CFR 
300.51 to provide a State, district, or local committee of a political 
party is prohibited from soliciting any funds for, or making or 
directing any donations of non-Federal funds to, certain tax-exempt 
organizations.
    For the reasons addressed in the discussion of proposed section 
300.37, the Commission invites comment on whether or not Levin funds 
should be subject to the section 300.51 prohibition.

Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory 
Flexibility Act)

    The Commission certifies that the attached proposed rules, if 
promulgated, would not have a significant economic impact on a 
substantial number of small entities. The basis for this certification 
is that the national, State, district and local party committees of the 
two major political parties are not small entities under 5 U.S.C. 601, 
and the number of other small entities to which the rules would apply 
is not substantial. Moreover, the proposed rules narrow the scope of 
certain restrictions applicable to the affected political party 
committees, and thus would not have a significant economic impact on 
the affected entities.

List of Subjects in 11 CFR Part 300

    Campaign funds, Nonprofit organizations, Political committees and 
parties.
    For the reasons set out in the preamble, the Federal Election 
Commission proposes to amend subchapter C of chapter I of title 11 of 
the Code of Federal Regulations as follows:

PART 300--NON-FEDERAL FUNDS

0
1. The authority citation for Part 300 would continue to read as 
follows:

    Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a), 441i, 453.

    2. In Sec.  300.11, the introductory text of paragraph (a) and 
paragraph (b)(3) would be revised to read as follows:

[[Page 71390]]

Sec.  300.11  Prohibitions on fundraising for and donating to certain 
tax-exempt organizations (2 U.S.C. 441i(d)).

    (a) Prohibitions. A national committee of a political party, 
including a national congressional campaign committee, must not solicit 
any funds for, or make or direct any donations of non-Federal funds to, 
the following organizations:
* * * * *
    (b) * * *
    (3) An entity that is directly or indirectly established, financed, 
maintained or controlled by an agent of a national committee of a 
political party, including a national congressional campaign committee.
* * * * *
    3. In Sec.  300.37, the introductory text of paragraph (a) would be 
revised to read as follows:


Sec.  300.37  Prohibitions on fundraising for and donating to certain 
tax-exempt organizations (2 U.S.C. 441i(d)).

    (a) Prohibitions. A State, district or local committee of a 
political party must not solicit any funds for, or make or direct any 
donations of non-Federal funds to:
* * * * *
    4. In Sec.  300.50, the introductory text of paragraph (a) and 
paragraph (b)(3) would be revised to read as follows:


Sec.  300.50  Prohibited fundraising by national party committees (2 
U.S.C. 441i(d)).

    (a) Prohibitions on fundraising and donations. A national committee 
of a political party, including a national congressional campaign 
committee, must not solicit any funds for, or make or direct donations 
of non-Federal funds to the following organizations:
* * * * *
    (b) * * *
    (3) An entity that is directly or indirectly established, financed, 
maintained or controlled by an agent of a national committee of a 
political party, including a national congressional campaign committee.
* * * * *
    5. In Sec.  300.51, the introductory text of paragraph (a) would be 
revised to read as follows:


Sec.  300.51  Prohibited fundraising by State, district, or local party 
committees (2 U.S.C. 441i(d)).

    (a) Prohibitions. A State, district or local committee of a 
political party must not solicit any funds for, or make or direct any 
donations of non-Federal funds to:
* * * * *

    Dated: December 3, 2004.
Ellen L. Weintraub,
Vice-Chair, Federal Election Commission.
[FR Doc. 04-27025 Filed 12-8-04; 8:45 am]
BILLING CODE 6715-01-P